NFIP rate hike set for Oct. 1 triggers storm of controversy

The reforms included in the Biggert-Waters Act of 2012 were directed at making the National Flood Insurance Program more financially secure. In Florida, the arguments about fiscal responsibility and actuarially sound rate structures were merely an extension of the ongoing debate over the solvency of Citizens Property Insurance Corp. — until homeowners here started to open their mail.

Congress understood that flood insurance premiums would have to go up for NFIP to remain viable. The Federal Emergency Management Agency, which administers NFIP, was given a year to calculate new and, again, actuarially sound rates. The year is up next week, on Oct. 1, and homeowners are aghast at their insurance bills.

The law was “not well thought out,” as one senator put it. First, the timing could not have been worse: The bill passed just before Superstorm Sandy hit the East Coast. Second, FEMA was drawing new flood maps at the same time it was working on the new rates — maps that were influenced by Sandy. Third, the law did call for an affordability study, but the study will not be complete until 2015; according to FEMA head and NFIP administrator Craig Fugate, the reforms in the bill were not tied to the results of the study anyway.

Fugate was speaking at a Senate hearing on the issue. The House has passed a bill postponing the rate hike for another year; the Senate has not yet voted on the proposal. At the hearing, Fugate said plainly that any changes to the plan must come from Congress; FEMA is powerless in the matter.

The impact of the rate increase goes beyond current policyholders. While they are opening their mail and seeing rates hiked by as much as 3,000 percent, the risk is greater than that. We discussed this in our Aug. 30, 2013, post, and we’ll get into even more detail, and Gov. Rick Scott’s reaction, in our next post.